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Friday, May 27, 2011

United Tractor Tbk

by Kresna Securities

We have upgraded UNTR to BUY giving 12M TP of Rp26,500. The April-11 Komatsu sales was outstanding, giving 64.2%YoY growth. YTD 4M11 performance has already reached 55.1% from our FY11 target. Meanwhile, Komatsu Japan has given their word to catch up its missing production by May allowing us to upgrade FY11-12 Komatsu sales volume by 27.1%-22.6%, coal extraction by 6.9%-0%, and overburden by 9.4%-2.4%. We have also increased Komatsu ASP by 1.9% as more big scale machine sold. Currently, UNTR is trading at FY11 P/E of 15.9x.

· April Komatsu sales remained strong. Komatsu sold 767 units in April, jumped by 64.2%YoY. Compared to the same period last year, mining, construction, and agro sales volume grew by 84.9%, 160%, and 10.8% respectively, but forestry declined by 23.4%. However, Komatsu market share slightly slipped by 1% to 53% MoM but much stronger than Apr-10 of 46%.

· Coal extraction was flat, but strip ratio improved. Wet season continue to hamper Pama’s client in April. Coal extraction volume in Apr-11 reached 6.1mt compared to 6.2mt in Apr-10. However, the strip ratio increased to 9.9x from 8.3x April-10 due to 16.5% overburden removal increased. The higher overburden removal was attributable to higher coal price which has allowed coal counter to open higher strip ratio spot. In 2011, UNTR expects average strip ratio to remain high at 8.5x-8.8x.

· Coal sales jumped by 113.3%YoY. The high volume differences were attributable to 60.5% higher volume from DEJ and 0.1mt initial contribution from TTA starting in Jan-11. 4M11 DEJ and TTA production have arrived at 38.7% and 24.9% respectively from FY11 company target.

· Upgrading mining equipment sales volume and ASP. 4M11 Komatsu sales unit has reached 40.9% of our FY11 target. Moreover, it seems that the earthquake disruption impact is not as bad as we have expected. Our revision expect supply disruption to last in May to June only and should go higher in July or August as Komatsu Japan intends to catch up its missing delivery starting in May. We have increased Komatsu FY11-12 sales volume by 27.1%-22.6% to 6,863-8,579 units. We have also increased FY11-12 Scania and UD Truck sales volume each by 30.6%-26.9% and 35.2%-28.4% to 620-759 units and 795-1025 units respectively due to strong 1Q11 performance. In addition, we have also upgraded Komatsu FY11 ASP by 1.9% due to higher portion of big size machine sold. In term of margin, we have increased the GPM by 1% to 20.0%.

· Upgrade FY11-12 coal extraction by 6.9%-0%, overburden by 9.4%-2.4%. With respect to Komatsu Japan targets to work up its supply delivery, we have increased our coal extraction and overburden as no more concern over mining equipment supply to Pama. Also, the upcoming dry season should improve Pama performance in the next following quarters.

· Coal: Reducing the top line, increases the margin. We have slightly reduced revenue from coal by 2.2% and 3.3% in 2011-2012 mainly attributable to the change of FX assumption to Rp8,800 from previously Rp9,000 though retained our volume and ASP assumption. In addition, we have decided to raise our GPM by 1% to 14% as the 1Q11 cost was lower than our early expectation.

 

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